I have tinkered excessively with my bike fit over the years. I recently saw the fit suggestion that there be a 90-degree angle from the torso to the arm (while on the hoods). Thing is, when I increase the reach to that point, my power output drops 20%+ for the same perceived effort -- which results in a 3 - 4 mph drop up a 12% grade. (The max I can go at full power puts me at about 75-80-degrees.) Yes, I know there's more to a proper fit than power, but if it drops that much, can that really be right? Is that a position that just takes time to adapt to? Or, is that just for a more aggressive/racing type fit? (I ride 6,000+ miles/yr., but don't race. And my house is 600+ feet up the side of a mountain.)
That 90 degree suggestion is purely for getting an optimal fit for aerodynamics. By bending your arm to 90 degrees, you're not presenting any of your forearm to the wind. If you watch the pros ride, this is typically how they'll carry themselves on flats and descents. Ultimately, you need to be comfortable though, and if bending your arms that much causes you to lose that much power, then it's probably not the best position for you. It's possible that there are other modifications to your fit that could be done to correct this, but that would require experimentation and/or a professional fitting. Check out this video from BikeRadar. It addresses your question pretty well.
Firstly, I was talking about the torso to arm bend (at the shoulder, NOT the elbow). As a bit of an update, after sliding my saddle rearward, it seemed I could get the reach a couple cm longer before losing power. While riding -- crawling? -- uphill, however, it became apparent something wasn't right. After more tinkering, turns out moving the saddle forward 5 mm, and shortening the reach by 2 cm allows me to go up a 10%+ grade at least 3 mph faster! So, I'll stick with this, regardless of what all those bike fitters I've been to have told me (i.e., that I'm too scrunched up). I do know my torso is much shorter than normal, compared to my legs, guess that's part of it. Perhaps being "upright" (walking/standing) all day at work doesn't help, either.